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Social Security benefits are typically computed using “average indexed monthly earnings.” This average summarizes up to 35 years of a worker’s indexed earnings. The Social Security department applies a formula to this average to compute the primary insurance amount (PIA). The PIA is the basis for the benefits that are paid to an individual.

The Social Security Administration (SSA) keeps a database of your earnings record and work credits, tracking both through your Social Security number. You can see this information on your Social Security Statement, which is available to everyone age 25 and over. The Social Security Statement also gives you an estimate of the benefits you’ll receive at retirement age, which can play an important role in your financial planning.

Periodically checking your estimated Social Security benefits serves several purposes: It helps you plan for retirement and allows you to check for and correct errors. It is not uncommon for clergy income to be reported incorrectly.

If you have evidence of your covered earnings in the year or years for which you think Social Security has made an error, call Social Security’s helpline at 800-772-1213, Monday through Friday, from 7 a.m. to 7 p.m.  Have all your documents handy when you speak with a representative.

Delaying taking Social Security can increase your payments significantly. 

Deciding when to take Social Security is one of the most critical decisions affecting your retirement.

  • You may be eligible to claim Social Security at the age of 62, but you can significantly increase your payments by waiting longer:
  • If you wait until age 66, your payments may be as much as 30 percent or more higher than if you start claiming at 62.
  • If you wait until age 70, the monthly payments are likely to be at least 75 percent more than if you start claiming at 62.

Making the decision of when to start Social Security benefits involves many variables, such as age, health, marital status, income level, tax bracket, financial need and others. In terms of general guidelines, there are a few situations when starting benefits early or later may make sense.

Reasons to Start Benefits Early
  • You may be in poor health and/or have a short life expectancy.
  • You may be out of work and need the income now to make ends meet.
Reasons to Delay Benefits
  • You are in good health and/or have a long life expectancy.
  • You currently are in a federal income tax bracket of (22 percent or more), because up to 85 percent of Social Security benefits may be taxable.
  • You want an increased permanent benefit amount.
  • You are younger than your full retirement age and plan to earn more than the annual earnings limit ($17,040 in 2018).

In 2017, the maximum monthly Social Security benefit for a worker retiring at full retirement age was $2,687. In 2018, the maximum benefit will increase $101 per month to $2,788.

Social Security Quick Calculator
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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